New York Wine Case Set for 2nd Circuit Argument

John Kramer
John Kramer · August 28, 2003

Washington, D.C.–The battle to open New York’s wine market—America’s second biggest—to out-of-state competition will reach a milestone with oral argument before the 2nd Circuit Court of Appeals on Wednesday, September 3, 2003, at 40 Foley Square, New York, N.Y.

The highly anticipated argument in Swedenburg v. Kelly will pit the Institute for Justice against the state’s top four wholesalers—with more than a billion dollars in combined revenues. IJ represents Virginia winemaker Juanita Swedenburg and other plaintiffs in a bid to open up New York’s borders to the direct shipment of wine to consumers. The liquor distributors, who intervened to defend the law that requires all wine shipped into New York be handled by wholesalers, receive a markup of up to 25 percent on wine imported into New York.

Clint Bolick, vice president of the Institute for Justice, said, ?Seven courts have issued divergent rulings in lawsuits challenging state bans on the direct interstate shipment of wine to consumers, creating a strong likelihood that the U.S. Supreme Court will have to resolve the issue, perhaps as early as the coming term.? Recent court decisions involving wine include:

  • The U.S. Court of Appeals for the 7th Circuit upheld Indiana’s ban on direct shipments in a decision by Judge Frank Easterbrook. The U.S. Supreme Court denied review.
  • The 11th Circuit overturned a district court decision upholding Florida’s ban, remanding the case to the district court to determine whether the State’s alleged concerns about taxation presented a viable defense.
  • The 4th Circuit struck down North Carolina’s ban, but held that the proper remedy was to forbid in-state wineries from shipping directly to consumers rather than to allow out-of-state wineries to do so. Fortunately, the North Carolina legislature opened up direct shipping and the governor signed the bill into law.
  • The 5th Circuit last month struck down Texas’ ban and allowed direct shipments by out-of-state wineries. The State has decided not to appeal.
  • The 6th Circuit ruled today that Michigan’s ban on direct shipping is unconstitutional. No word yet on whether the State will appeal.
  • The U.S. District Court for the Southern District of New York struck down that state’s ban and ordered the state to allow out-of-state wineries to ship directly to consumers. This case will be argued before the 2nd Circuit Court of Appeals September 3.
  • A Virginia federal court struck down the Commonwealth’s ban, which was legislatively repealed while the case was pending before the 4th Circuit to allow direct shipping.

“The direct shipment of wine pits consumers and small wineries against wholesalers seeking to protect their multi-billion-dollar monopoly over alcohol distribution,” said Steve Simpson, an IJ senior attorney. “In the end, I have no doubt that consumers and America’s free market will win the day.”

Twenty-four states prohibit direct shipments of wine to consumers by out-of-state wineries, seriously impeding the ability of small wineries to market their wines and of consumers to purchase them. Some states make it a felony. A number of states that prohibit out-of-state wineries allow in-state wineries to ship directly to consumers, giving rise to claims of economic protectionism.

Attorneys involved in the cases transcend the ideological divide. The litigation team for wineries and consumers includes Bolick, Kenneth Starr, and Indiana ACLU activist J. Alex Tanford. The wholesaler team includes Robert Bork and former White House Counsel C. Boyden Gray. The Institute for Justice is working closely with lawyers in the other cases to present a united front against the wholesaler monopoly that separates consumers from their favorite wines.